Recent public statements by Canada Post give the impression that there is a serious crisis facing the corporation’s Defined Benefit Pension Plan and that this is threatening the financial viability of the post office.
The most recent Retiree Pension Bulletin states:
“In addition to volume decline, the increase in the Canada Post Pension Plan’s solvency deficit to be funded from $4.7 billion to $5.9 billion places greater pressure on the financial position of Canada Post going forward.”
In the 2012 Annual Report, President of Canada Post Deepak Chopra declares:
“On the cost side, we carry an unprecedented level of solvency deficit caused by a prolonged period of low interest rates and volatile investment returns. Together, these two forces — competition and cost — are creating a perfect storm. We must fundamentally rethink our business.”
Just like the discussion on the “evaporation of mail volumes,” Canada Post is using exaggeration and a doom and gloom scenario to hide from Canadians what the actual situation is regarding the Pension Plan and the overall situation of Canada Post in the Canadian economy. The agenda of the Harper government is further privatization and deregulation of the post office and that means severe cut-backs in services and further attacks on workers’ rights and benefits like the roll-backs that were rammed through in the last contract. It is clear that the Defined Benefit Pension Plan is next on the chopping block.
A closer examination of the fine print in the 2012 Annual Report shows that Canada Post has no intention of taking up their responsibility of dealing with the underfunding that exists. On the contrary, they will continue to avoid paying their required share and exacerbate the situation and are planning ultimately to shift the financial burden on the backs of the postal workers.
The corporation’s plans regarding the pension plan are outlined in 2012 Annual Report but they clearly have no intention of having a full public discussion of all the facts.
On page 34 of the Annual Report under the heading “Outlook 2013” we find the following:
“Pension and employee future benefit costs will continue to be a major challenge. Most defined benefit pension plans across the country face ongoing significant funding challenges in light of demographic shifts and a prolonged period of low interest rates and volatile investment returns. Plan sponsors such as Canada Post are required to eliminate these funding shortfalls, over time, and they are exploring innovative options to address the crisis, including potential regulatory relief.
“In the short term, Canada Post plans to continue using the legislation that allows Crown corporations to better manage their funding obligations, and will again seek approval of pension relief in 2013 to reduce its special solvency payments. However, given that under current legislation relief is capped at 15% of plan assets, we expect to reach the relief limit in early 2014.”
The Report points out under “Operating Activities” that there was an increase in cash generated from $196 million in 2011 to $310 million in 2012 mainly because Canada Post reduced payments into the pension and other post-employment and long-term benefit payments. In April 2011, amendments to the regulation of the Pension Benefits and Standards Act 1985, came into effect allowing companies with federally regulated pension plans to reduce their payments if ministerial agreement is provided.
The following quote from page 50 of the Report reveals how Canada Post avoided making the required special payments to eliminate a shortfall in the fund as required by the Act:
“Special contributions to the Canada Post Registered Pension Plan are dependent on changes in discount rates, actual returns on RPP assets and other factors such as plan amendments. Employer special contributions of $63 million were made in 2012, compared to $219 million in 2011. In 2012, the Corporation used the funding relief permitted by legislation. Without this relief, an additional $897 million in special solvency contributions would have been required from the Corporation. The aggregate amount of the funding relief as at December 31, 2012 is $1.3 billion. Based on the expected actuarial valuation, 2013 special contributions are estimated at $28 million.
“It is the Corporation’s intent to seek agreement from the Ministers to use the relief permitted by legislation beyond June 2013 to obtain a reduction of 2013 special solvency contributions. Without the relief, the Corporation’s contributions would increase by approximately $1.2 billion. The aggregate amount of the relief at the end of 2013 is expected to total $2.4 billion. As the aggregate amount of the relief is limited to 15% of RPP assets, the Corporation expects to reach the limit in early 2014, putting significant pressure on the Corporation’s cash resources. We are evaluating all options including regulatory relief and changes to plan design to help address these challenges.”
Thus the corporation was able to use amendments to the Act to avoid making their required contribution to the pension fund. Therefore, by the end of 2013, the actions of Canada Post in refusing to make their required contribution will cause an added shortfall in the plan of $2.4 billion. An important example is the way the corporation is avoiding its responsibilities for the past year. According to the Annual Report, in 2012, Canada Post recorded an actuarial loss of $780 million but they intend to use the legislative loophole to make a special contribution of $28 million which will add to the problems facing the Pension Plan.
But it doesn’t end there. Harper’s infamous omnibus budget Bill C-45 (the Jobs and Growth Act) helps the corporation to further shift the burden of the pension plan deficit on the backs of the workers. As of January 1, 2013, the Bill allows the cap for employees’ share of current service costs to be increased from 40 to 50 per cent. The Annual Report declares on page 50 that Canada Post “intends to share current service costs with employees on a 50/50 basis.” This plan has never been publicly announced or discussed.
The corporation claims that it is evaluating all options to deal with the problems facing the Pension Plan but it is clear that taking up the responsibility as plan sponsor to make special payments to cover all shortfalls is not one of the “options.” This is the height of hypocrisy since it was Canada Post along with other major corporations who pressured the Liberal government in the mid 1990`s to pass legislation allowing public service pensions including the CPP to be invested in the stock market. This has already resulted in billions of dollars being transferred from pension plans into the coffers of monopoly corporations.
Canada Post also did not hesitate to take hundreds of millions of dollars from the Pension Fund during periods when the fund was in surplus.
Canada Post’s 2012 Annual Report clearly shows that the attack against the Defined Benefit Pension Plan is an important part of the drive for further privatization and deregulation of the post office. The so-called financial crisis facing the postal workers’ Pension Fund is not due to any economic trend but is the result of a concerted, well-organized attack of the corporation and the government against the right of workers to a stable retirement income in a modern society.
The Annual Report repeatedly states that the corporation plans to secure its profits by reducing the revenue flowing into pensions and transferring it into general accounts to be used as they see fit. All the other talk about “solvency deficits,” and “volatile investment returns,” etc., etc. is just a smokescreen to hide the fact that the corporation is diverting revenue that should be going into the Pension Fund.
Concessions extorted from the working class are not solutions. All the assets of the corporation, including the Pension Fund, exist because of the value produced by postal workers who have a right to expect that the Defined Benefit Pension Plan is properly funded and maintained.
Canada Post must fulfill its obligations towards the workers!